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Why I’d buy AstraZeneca plc and Taylor Wimpey plc today

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Both the pharmaceutical and house building sectors have had a bumpy ride lately, but I still reckon you should buckle up and get on board. In fact, you could even turn recent turbulence to your advantage.

Time to buy

 Today could be a good entry point for AstraZeneca (LSE: AZN) and Taylor Wimpey (LSE: TW), with both seeing their share prices fall by more than 5% in the last three months.

As I wrote last November, investors have to be patient with AstraZeneca right now and put their faith in CEO Pascal Soriot’s long-term drugs pipeline. That remains the case following yesterday’s publication of the group’s full-year 2017 results, which did little to move the share price either way… because the prize is further down the line. AstraZeneca is positioned for product sales growth in full-year 2018, which would be the first time in four years, but the real action should come in 2019 and beyond, when we see whether current R&D finally bears fruit.

Income play

You can find more detail on yesterday’s results in this piece by my Foolish friend Kevin Godbold, but what impresses me is how investors have kept their faith in the AstraZeneca. It still trades 15% higher than a year ago, and investors continue to put a premium on its prospects, with the stock trading on a forward valuation of 19.1 times earnings. That’s despite the anticipated 5% drop in earnings per share (EPS) in 2018.

City analysts expect better news in 2019, when they are pencilling in 12% EPS growth. A forecast yield of 4.3% should keep spirits up while investors wait to see if Soriot can deliver. We will know more in the second half of this year, when the results of several high-profile pipeline treatments are in.

Full house

House builders were hammered in the wake of Brexit, which always struck me as an over-reaction. Latest figures from Nationwide show house prices rising 3.2% in the year to January, which is more than respectable and should soothe fears that we are nearing the top of the property market.

Last month, Taylor Wimpey said it anticipates further growth and improved performance in 2018, despite ongoing political and economic uncertainty. Average selling prices on private completions rose 3% to £296,000, with the overall average selling price up 4% to £264,000.

Taylor-made

Taylor Wimpey’s growth prospects are solid but the income stream is spectacular, with a forecast yield of 7.6%, covered 1.4 times, making this one of the best on the FTSE 100. Management has pledged to pay a total full-year 2018 dividend of around £500m, subject to shareholder approvals, with further capital returns in 2019 and beyond.

The £6.19bn company’s earnings may slow after four years of double-digit EPS growth.

However, forecasters are pencilling in steady single-digit growth of 9% and 4% in 2018 and 2019, respectively, by which time the stock will still be yielding a dizzying 7.8%. The yield alone makes this is one of the most attractive companies on the FTSE 100, while a forecast valuation of a mere 9.5 times earnings seals the deal.

Naturally, Brexit could play havoc with all your stock picks right now, so brace yourself for further turbulence on that front.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.